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North Carolina Sales Tax Exemption, Datacenters

  • Oct 13, 2015 | Gail Cole

 Electricity used in datacenters is exempt from North Carolina sales tax, January 2016.

Effective January 1, 2016, North Carolina provides a sales tax exemption for electricity for use at a qualifying datacenter, and for datacenter support equipment to be located and used at the qualifying datacenter.

To qualify for the exemption under the North Carolina Competes Act, datacenter support equipment must be used for one of the following purposes:

  • The provision of a service or function included in the business of an owner, user, or tenant of the datacenter.
  • The generation, transformation, transmission, distribution, or management of electricity, including exterior substations, generators, transformers, unit substations, uninterruptible power supply systems, batteries, power distribution units, remote power panels, and other capital equipment used for these purposes.
  • HVAC and mechanical systems, including chillers, cooling towers, air handlers, pumps, and other capital equipment used for these purposes.
  • Hardware and software for distributed and mainframe computers and servers, data storage devices, network connectivity equipment, and peripheral components and equipment.
  • To provide related computer engineering or computer science research.

If all requirements for the sales tax exemption are not met, it will be forfeited and the taxpayer will become liable for all past taxes that would have been due without the exemption, plus interest. Details are available in Section 3(b) of the North Carolina Competes Act.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.